U.S. equity futures looked to rebound from one biggest single-day declines of the past two years Wednesday, with investors hoping that stronger-than-expected tech earnings can boost sentiment amid the collective concerns over Fed rate hikes, China’s Covid lockdown and Russia’s war on Ukraine.
Microsoft (MSFT) – Get Microsoft Corporation Report shares could provide some early thrust for tech stocks following its better-than-expected third quarter earning last night, with the heavyweight cloud and computing group helping the Nasdaq recover from a 514 point plunge that dragged the index to its lowest levels since December of 2020.
A much wider-than-expected loss for Dow component Boeing (BA) – Get Boeing Company Report, however, added to some of the market’s broader concerns over the strength of the first quarter earnings season.
Bullish tech sentiment will also need to fight against a worrying escalation of tensions between Russia and its European neighbors after the state-controlled energy giant Gazprom cut off natural gas supplies to Poland and Bulgaria for failing to meet an earlier demand to pay in roubles.
The move, widely seen as a warning to Germany and other western European states that have challenged Russia’s February invasion of Ukraine, helped push the euro to a five-month low of 1.0597 against the U.S. dollar and kept gains for regional stocks muted in early Frankfurt trading.
The U.S. dollar index, meanwhile, continues to print multi-year highs against its global peers — amid its best April gain in more than five years — and was marked another 0.43% in overnight trading to 102.738 as traders price-in the impact of 50 basis point rate hikes at both of the Federal Reserve’s next two policy meetings and move into safe-haven assets.
That, in part, has lifted the market’s key volatility index, the VIX, well past the 30 point mark, a level traders typically associate with large intra-day moves for major U.S. indices.
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“Investors are simply unwilling to pay premium prices for stocks with the near certainty that the Federal Reserve will raise interest rates many more times this year,” Ryan Belanger, managing principal and founder, Claro Advisors, a wealth management firm based in Boston with $700 million in assets under management.
“Since the Covid lows of March 2020, we have yet to see any meaningful stock market pullback until now,” he added. “It’s understandable to see choppy markets after nearly two consecutive years of strong gains.”
That, as well as another busy slate of corporate earnings with likely capture attention on Wall Street again Wednesday, with Boeing BA, T-Mobile US (TMUS) – Get T-Mobile US, Inc. Report and Kraft Heinz (KHC) – Get Kraft Heinz Company Report reporting before the bell and Meta Platforms FB, Ford (F) – Get Ford Motor Company Report, PayPal (PYPL) – Get PayPal Holdings, Inc. Report and Qualcomm (QCOM) – Get Qualcomm Inc Report expected after the close of trading.
Futures contacts tied to the Dow Jones Industrial Average are indicating a 210 point opening bell gain while those linked the S&P 500, which is down 12.4% for the year, are priced for a 16 point move to the upside. Futures linked to the tech-focused Nasdaq are looking at a modest 33 opening bell advance.
Alphabet (GOOGL) – Get Alphabet Inc. Class A Report shares slumped 4% lower after the search and ad sales giant posted softer-than-expected first quarter revenues amid a global pullback in ad sales linked in part to Russia’s war on Ukraine and increasing competition from China-based TikTok.
Boeing fell 4.5% after it posted another wider-than-expected first quarter loss thanks in part to around $1.5 billion in ‘abnormal cost’ charges linked to its 777x twin-engine jet.
Microsoft gained 3.6% after the tech giant forecast stronger-than-expected revenue growth for its key divisions, offsetting concerns over the pace of gains in its Azure cloud offering.
T-Mobile US (TMUS) – Get T-Mobile US, Inc. Report jumped 2.8% following much stronger-than-expected first quarter earnings as well as a boost in its forecast for net additions over the full year, as it continues to attract new customers with its expanding 5G network.